commercial domestic investigations

Bad debt plagues SMEs.

As a UK-based small business owner, it is key that you deal with unpaid invoices. A poll carried out by Xero indicates that small company heads spend 10% of their working days chasing down late payments, waiting 14 days past the invoice due date on average to receive the funds they are owed.

Recovering late payments can prove extremely time consuming, but it is a necessary task, as the alternative is far worse. When your customers fail to pay, your firm acquires bad debt, depriving it of the stable cash flow needed to operate effectively on a daily basis. A recent study has suggested that bad debt is a continuing issue for UK small to medium-sized enterprise (SME) owners.

Struggling with bad debt

Business advice portal SME Insider reports that this research was undertaken by Bibby Financial Services. The firm discovered that over a quarter of British SMEs have been given no choice but to write off bad debt in the past. Meanwhile, 27% of those questioned have written off money their businesses were owed throughout the past year alone.

Looking at these findings more closely, we see that on average, UK SMEs have been forced to write off £11,829 because their consumers failed to pay. Shedding light on the poll’s results David Postings, the Global Chief Executive of Bibby Financial Services, said that “a chronic problem [of bad debt] for SMEs [which] can lead to staff cuts, delayed investment plans and – at worst – insolvency.”

The Bibby research also showed which British industries have been most severely impacted by bad debt. The worst hit sector was transport, with 30% of businesses trading in this industry admitting that they have written off bad debt during the past year. Construction followed, with companies operating in this sector writing off an average of nearly £15,000 during the past 12 months.

Ongoing SME problem

Furthermore, Bibby found that over 1.4m UK small companies are still struggling with bad debt. But the study also provided some good news for British SMEs. According to the financial services company, the amount of time small businesses wait for payment on unpaid invoices has dropped from 40 days to 38 days on average, suggesting that more SMEs are being paid within reasonable time frames.

Speaking further on the survey’s findings, Postings noted: “Non-payment can occur due to customer insolvency, payment default or dispute and the issue is particularly problematic in industries where raw materials and labour costs have been paid up front… The construction sector is particularly prone to the effects due to the nature of billing and notoriously lengthy payment terms.”

With this research, Bibby has just further proved how important it is that you deal with unpaid invoices effectively. It is key that you invest in measures to protect yourself from bad debt, both before and after your company does business with a client. Here at Commercial Domestic Investigations, we provide debt collection services needed to reduce the likelihood that late payments will turn into bad debt.

About Commercial Domestic Investigations

Commercial Domestic Investigations are regarded within the debt collection and credit control industry as one of the best credit management companies in the UK. Established in 1988 to support and service all sizes of companies in the field of Credit Management.

Commercial Domestic Investigations have recently featured in the press in The Guardian. To keep up to date with the latest debt collection news make sure to follow Commercial Domestic Investigations on twitterLinkedIn, Google+ and Facebook.

We now boast a national client base in excess of 30,000 companies. Commercial Domestic Investigations has grown by listening to clients’ requirements and adapting our services to meet all companies’ needs from Sole Traders, SMES, Ltd and Plus. Please contact us on 08444 159200 for more information.